Understanding the Effects of Different Types of Oil Shocks on Korean Manufacturing Industry (in Korean)

This paper examines the effects of different types of oil shocks on demand and supply in the manufacturing industry of Korea. For this purpose, oil shocks are classified as oil supply shocks, oil demand shocks, and oil speculative demand shocks. For empirical analysis, SVAR models including industry-level data are constructed, and the "sign restrictions" approach is employed for identification. The analysis of the impulse responses of industry-level output and price shows that, in the case of oil supply shocks to the energy-intensive industries such as petroleum, coal, chemicals, oil shocks mainly reduce supply. In contrast, in the case of oil demand shocks arising from changes in global economic activities, oil shocks are found to reduce the demand for the export-intensive industries, such as general machinery, electric machinery, precision instrument, and transport equipment. In the case of oil speculative demand shocks, for most industries, oil shocks reduce both supply and demand. In particular, for industries which are energy-intensive or have many backward industries, the reduction in supply seems more important. However, for industries which produce final consumption goods or have many forward industries, the decrease in demand looks more crucial. Finally, the output responses to these different types of oil shocks show similar patterns across most industries. The results indicate that oil shocks do not cause sectoral relocation across industries, but rather reduced production across different industries, resulting in economy-wide recessions.